SEBI PITCHES FOR ‘PERSON IN CONTROL’ OVER PROMOTER

SEBI PITCHES FOR ‘PERSON IN CONTROL’ OVER PROMOTER

Subject: Economy

Context: Markets regulator Securities and Exchange Board of India (SEBI) proposed to rationalise the definition of ‘promoter group’ and move to the concept of ‘person in control’ as well as lower the minimum lock-in periods for promoters and other shareholders after an IPO.

Concept:

• SEBI has suggested rationalising the definition of ‘promoter group’ as the current definition focusses on encompassing holdings by a common group of individuals or persons and often results in including unrelated companies with common financial investors.
• The regulator has proposed to do away with the current definition of promoter group as the deletion would rationalise the disclosure burden and bring it in line with the post listing disclosure requirement.
• Citing the changing investor landscape, SEBI said there was a need to revisit the concept of ‘promoter’ to a concept of ‘person in control’ and a period of three years has been proposed for such a shift over in a smooth and progressive manner without causing disruption.
• With regard to lock-in periods, SEBI has proposed that if the objective of the issue involves offer for sale or financing other than for capital expenditure for a project, then the minimum promoters’ contribution of 20% should be locked-in for one year from the date of allotment in the Initial Public Offer (IPO). Currently, the lock-in period is three years.
• SEBI has sought comments from the public on the proposals, the window being open till June 10.